Scenario #1:
RP as a traveler in a Realm, get into someones good graces when meeting them on the road. The second they lower their guard, you pull a knife and steal their horse.
Now your name is flagged on the server and you can't really do it again.

Scenario #2:
Try to play two kingdoms against eachother, supply them both with arms, bombs etc, seed the beginnings of a war.
Before the battle the two kings talk to eachother,
"Player X has told me you raided his lands, prepare to pay!"
"W00t, Player X has told me the same thing about you!"
Name is flagged and you can't do it again.

A solution to these things would be to be able to alter your appearance, maybe grow a beard on you character, get a different haircut, wear a helmet etc.
But your name is always visible.

It would be very cool to be able to...
1. Chose to publicly declare your name (the current system, aim the reticle at someone, see their name), Kings would probably do this all the time.
2. Pick a false name. Players who has already been given your real one would see through your scam and always see your real character name.
3. Play without a public name completely.
4. Gear that covers your face would also hide your name unless you choose option 1

This would allow for a LOT of interesting RP scenarios between players and give them more opportunity to either play as a more well known person, a trusty merchant, a king, the realms best blacksmith.
Or a bandit living in a forest, staying in the shadows, changing outfits to play the honorable farmer at day, and a thieving bastard at night.